New farm equipment sales in Canada are projected to be softer into 2024, as higher interest rates, elevated equipment prices and a decline in commodity prices impact purchasing decisions, according to a Farm Credit Canada analysis.
Inflationary price pressures remain persistent despite recent economic weakness, meaning interest rates will likely stay higher for longer, which may alter equipment replacement cycles, the analysis said. That has impacted farm equipment sale trends as producers have delayed purchase decisions until interest rates stabilize or fall. As replacement cycles lengthen, sales will slow, and inventory levels will increase.
However, the analysis warned a major trend is the age of the equipment fleet. The strong sales during the 2008 – 2014 period are early indications that the 4WD tractor, 100+ HP tractor and combine fleet is starting to age when looking at the rolling average of five-year sales relative to 10-years on new equipment to estimate the replacement cycle age.
While replacement cycles can be altered, and older equipment can be serviced and overhauled, a slowdown in new equipment sales could be short-lived, the analysis said, adding sales could improve in the second half of 2024 and beyond if interest rates decline and producers move to upgrade their aging fleet.
“One factor producers must also balance in their decision-making is the additional repair costs of older equipment and efficiency gains in newer models,” the analysis said.
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